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Here’s a common paradox L1s face today:
L1s want to enable application-specific L2 chains because every app cannot coexist in the same blockchain environment. Builders want freedom to customize.
But when every appchain is making their own independent design decisions, you have fragmentation. Then they leave your L1.
Ethereum, Cosmos, Avalanche and Polkadot have all suffered from similar problems.
Initia’s architecture
Initia, which is launching its mainnet today, is determined to run back the same appchain vision while avoiding the pitfalls of fragmentation.
Appchains that choose to build on Initia benefit from a tightly integrated and opinionated tech stack — what Initia calls the “Interwoven Stack.”
All Initia appchains are built with the same stack and standards. They share a canonical bridge (LayerZero), cross-chain messaging (Cosmos IBC), underlying framework (Cosmos SDK) and standardized gas token (native USDC via Noble is the default though chains can change it) across chains, as well as and data availability layer (Celestia).
Appchains can run on whichever execution environment they prefer. Of the 18 announced teams building on the Interwoven Stack, they are generally evenly split between the EVM, MoveVM and WasmVM, Initia’s co-founder Zon told me.
They can also leverage common MEV infrastructure like POB (Protocol Owned Builder) and Protorev to capture non-toxic MEV, use a common enshrined oracle (Connect), a common multisig (Initia Multisig), block explorer (Initiascan) and domain name service (Initia Username).
You get the idea — it’s every essential public good possible to allow an ecosystem of differently-minded builders to run on common standards without suffering fragmentation.
OK, well what about the L1?
The Initia L1 runs on the MoveVM and CometBFT consensus with single slot finality and a 500 ms blocktime.
The L1 is meant to act as a liquidity hub, very much like what Cosmos Hub aspired to be.
What keeps liquidity on the L1? INIT token holders can stake INIT on the L1 to earn inflationary staking rewards, as well as trading fees on Minitswap, the L1’s native DEX.
There is no fee charged to pass through the hub right now, though that may be integrated down the road, the Initia team said.
This is referred to as “enshrined liquidity,” which effectively enables INIT tokenholders to benefit from both staking rewards as well as act as a liquidity provider — a restaking of sorts.
What would deter successful Initia appchains from leaving Initia to create their own chains?
For one, appchains already have full customization over their environment and are able to internalize their own MEV.
Secondly, Initia appchains are not the same as general-purpose L2 rollup chains, so their native tokens will likely exist on the L1 where the most liquidity is.
“They’re not going to launch a DEX on their chain because that’s not what their appchain is for,” Initia co-founder Stan said.
Finally, Initia explicitly rewards appchains with INIT rewards based on TVL and governance metrics as part of its Vested Interest Program (VIP). Users earn INIT based on criteria set by L2s.
The VIP program is what Initia hopes will stave off the lack of value accrual that ATOM suffered from.
“The greatest downfall for ATOM was the fact that Cosmos users did not care for the token itself. Cosmos appchains did not have a strong reason to integrate ATOM.”
To be fair, these aren’t particularly original mechanics. Initia’s VIP rewards have striking similarities to Berachain’s “proof-of-liquidity” or Blast’s “Gold” campaign. MEV capture is being pursued by many other ecosystems/apps. Arbitrum announced custom gas tokens today.
What is perhaps original is the holistic combination of all of these design choices from day one to avoid the many problems of value accrual that have plagued ATOM or ETH.
Initia launch
Initia has raised $25m in total through three private rounds and a $2.5m Echo round in September 2024.
According to Initia’s press release, there are at least 18 teams that are building on its Interwoven Stack. These teams have collectively raised $28m, notably more than Initia’s own raise. I noticed a similar pattern with MegaETH. Is the fat protocol thesis dead?
Anyway, INIT goes live today. Here are its tokenomics.
